Recent Waves of Disruptive Technologies for the BPO Industry

Disruptive technology is defined as emerging technology that unexpectedly displaces an established one. The Business Process Management (BPO) industry, whose market size in 2015 was estimated at $88.9 billion, is no exception to such displacements. Recent advancements in information technology are set to change some of its fundamental processes. Let’s take a look at two disruptive technologies that will replace the BPO industry’s labor arbitrage.

Robotic Process Automation

For a few years now, Robotic Process Automation (RPA) has been the next big thing in the BPO industry. Also known as “no-shoring” as opposed to off-shoring, it has been hailed as such a disruptive wave to the entire outsourcing industry that it is driving a shift from BPO to BPA—Business Process Automation.

Even at its infancy, the buzz comes with good reasons. It has already proven to be more than technological hype. The labor arbitrage from outsourcing business processes used to make perfect sense. Business processes done overseas cost less than onshore labor. However with the advancements in information technology, the rules-based repetitive actions are now the easiest to automate with software.

The result is a replacement of human labor with software. Repetitive tasks like manual toggling and manual data extraction normally done by low-cost staff can now be replicated by software robots. These software robots don’t suffer fatigue and distraction. They operate three times faster, work around the clock, and experience no errors, absences or diminishing returns. They also cost one-third as much as an offshore employee. Scaling up or down the number of RPA bots is also easier than hiring and training new employees. During peak seasons, new robots can be switched on and be fully functional in twenty minutes.

Though some executives struggle to understand the technology, this hasn’t stopped the wise and the brave from reaping the massive benefits of eliminating the human touch from mundane processes, as A.T. Kearney’s 2016 Global Services Location Index attests. As evidenced by the return on RPA investments of big players, automation is set to soar. Barclay’s Bank made a savings of 120 full time employees and an annual debt reduction in bad debt provisions of $ 250 million. Telefonica O2 uses 160 robots to automate 15 core processes for 500,000 transactions a month. This translated into a three year return on its RPA investment in excess of 650 percent.

Business Process as a Service

A more recent wave of automation is set to take center stage with RPA as disruptors of Business Process Management. The same report by A.T. Kearney indicates that business process as a service, or BPaaS, will work hand-in-hand with RPA in automating the BPO industry. This new disruptor is slightly different from RPA. RPA robots emulate or copy what employees do by recording their actions in the company’s own user-interface, while BPaaS provides a standardised interface and process to multiple customers. RPA can be in-sourced, while BPaaS is outsourced and based in the cloud. RPA robots are purchased with software licensing fees, while BPaaS costs are a usage-based subscription.

Even though BPaaS accounted for $18 billion of the $160 billion global BPO market in 2014, switching to BPaaS is not as cut and dried. Corporations turning to conventional outsourced services already achieve economies of scale. As these BPO contracts end however, A.T. Kearney research suggests that BPaaS will make more sense over conventional outsourcing, with improved quality, improved cost savings and competitive rates. BPaaS has also shown to be kinder for smaller companies, with small to medium companies entering the BPO services industry via the BPaaS route, at times linking with enterprise cloud services. Among the biggest news in BPaaS was the HP and Microsoft partnership to provide BPaaS solutions in the automotive, public sector and financial services industries.

It now remains to be seen if more and more companies that have built their reputations and wealth on the conventional way of outsourcing will adopt these technologies. Given the cost advantages, experts believe that it’s only a matter of time that adoption will mean survival. The main questions in adopting RPA or BPaaS they will have to consider are “when” and “how.”